Mumbai: Defying the impact of the note- ban which has yanked down consumer sentiment, the rural wages have been on a steady upward spiral, rising by 7.3% in November, suggesting a likely release of pent-up demand after demonetisation, says a report.

“Nominal rural agricultural wages rose to 7.3 per cent year-on-year in November, from 6.9% in October, remaining well above the previous 12-month average of 4.8%,” Japanese brokerage Nomura said in a note. “We expected rural wage growth to moderate in November, as we thought demonetisation would hurt the more cash-reliant rural economy,” Nomura India chief economist Sonal Varma said in the note.

It can be noted that this comes amidst a slew of reports coming in suggesting a deeper cut on the economy. The purchasing sentiment of consumers fell steeply by 0.42 points due to demonetisation, with the buying propensity index standing at 0.26 points in December, according to TRA Research. This was 0.68 points in November. Noting that the buying sentiment in December has fallen precipitously to the lowest in nine months, the report said the December fall was probably when the pain of demonetisation began to be felt more severely after the first salary cycle.

Rural wages may have defied this demonetisation effect because of the hike in minimum wages announced by the government in September, Varma reasoned and cited that Reserve Bank data, which shows that the revision in basic wages, including variable dearness allowances, worked out to an overall increase of 42% and would impact rural wages as well. It can be noted that rural wage growth has only recently started to trend higher, after almost two years of stabilisation.

“The resilience of nominal rural wage growth, despite demonetisation and amid lower inflation (which means higher real wages), suggests that the current slowdown in rural demand is transitory and can give way to a sharp release of pent-up demand once the economy is sufficiently remonetised, which we expect by end-March,” Varma said.